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CISG CASE PRESENTATION

China 30 August 1996 CIETAC Arbitration proceeding (Brake pads case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/960830c1.html]

Primary source(s) of information for case presentation: Case text

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Case identification

DATE OF DECISION: 19960830 (30 August 1996)

JURISDICTION: Arbitration ; China

TRIBUNAL: China International Economic & Trade Arbitration Commission [CIETAC] (PRC)

JUDGE(S): Unavailable

DATABASE ASSIGNED DOCKET NUMBER: CISG/1996/40

CASE NAME: Unavailable

CASE HISTORY: Unavailable

SELLER'S COUNTRY: People's Republic of China (claimant)

BUYER'S COUNTRY: United States (respondent)

GOODS INVOLVED: Brake pads


Classification of issues present

APPLICATION OF CISG: Yes [Article 1(1)(a)]

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 62 ; 78 [Also cited: Article 74 ]

Classification of issues using UNCITRAL classification code numbers:

62A [Seller may compel performance of any of buyer's obligations: payment of price];

78A [Interest on delay in receiving price or any other sum in arrears]

Descriptors: Price ; Interest

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Editorial remarks

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Citations to case abstracts, texts, and commentaries

CITATIONS TO ABSTRACTS OF DECISION

(a) UNCITRAL abstract: Unavailable

(b) Other abstracts

Unavailable

CITATIONS TO TEXT OF DECISION

Original language (Chinese): Zhong Guo Guo Ji Jing Ji Mao Yi Zhong Cai Wei Yuan Hui Cai Jue Shu Hui Bian [Compilation of CIETAC Arbitration Awards] (May 2004) 1996 vol., pp. 1745-1750

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Dong WU, CIETAC's Practice on the CISG, at n.123, Nordic Journal of Commercial Law (2/2005)

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Case text (English translation)

Queen Mary Case Translation Programme

China International Economic & Trade Arbitration Commission
CIETAC (PRC) Arbitration Award

Brake pads case (30 August 1996)

Translation [*] by Meihua Xu [**]

Edited by John W. Zhu [***]

The China's International Trade and Economic Arbitration Commission (hereafter, the "Arbitration Commission") accepted the case on 20 June 1995 according to:

   -    The arbitration clause in the following contracts signed by Claimant [Seller], China Qingdao __ Import & Export Company and Respondent [Buyer], America __ Company:
 
94BQDTUSD 005A-C signed on 14 January 1994;
94BQDTUSD 010 signed on 26 January 1994;
94BQDTUSD 0015A-B signed on 23 February 1994;
94BQDTUSD D0020A-B signed on 5 March 1994;
94BQDTUSD 0025A-B signed on 23 March 1994;
94BQDTUSD 0029A-B signed on 13 April 1994;
94BQDTUSD 032A-C signed on 3 May 1994;
94BQDTUSD D039A-C signed on 19 May 1994; and
 
   -    The written arbitration application submitted by [Seller] on 6 June 1995.

After receiving the arbitration notice, on 11 July 1995, the [Buyer] submitted a Jurisdiction Objection to the Arbitration Commission. Based on the Arbitration Rules and after discussion, on 16 October 1995, the Arbitration Commission decided that the Arbitration Commission had jurisdiction in this case.

On 17 October 1995, the Secretariat Office of the Arbitration Commission sent a (95) Maozhongzi __ Jurisdiction Decision Notice to the [Buyer] by registered mail, asking the [Buyer] to appoint an arbitrator by mailing a notice to the Arbitration Commission within twenty days after it received the Jurisdiction Decision notice. The acknowledgement of receipt indicated that the [Buyer] had received the aforesaid Jurisdiction Decision notice on 30 October 1995, however, the [Buyer] failed to appoint an arbitrator within the time limit stipulated in the Arbitration Rules.

The [Seller] appointed Mr. A as its arbitrator, and the [Buyer] did not appoint or ask the Director of the Arbitration Commission to appoint an arbitrator, therefore, according to Article 26 of the Arbitration Rules, the Director of the Arbitration Commission appointed Mr. D as the [Buyer]'s arbitrator. Because the [Buyer] and the [Seller] did not jointly appoint or ask the Director of the Arbitration Commission to appoint a Presiding Arbitrator, according to the Arbitration Rules, the Director of the Arbitration Commission appointed Mr. P as the Presiding Arbitrator.

On 19 December 1995, Mr. P, Mr. A, and Mr. D formed Arbitration Tribunal to hear this case. On the same day, the Secretary Office of the Arbitration Commission sent the (95) Maozhongzi __ Arbitration Tribunal Formation Notice to the [Seller] by registered mail and fax and to the [Buyer] by registered mail.

The [Buyer] did not submit a written arbitration answer within the time limit stipulated by the Arbitration Commission. The Arbitration Tribunal examined the arbitration application and the attached evidence provided by the [Seller], and decided to hold a court session in Beijing on 19 March 1996,.

On 8 January 1996, the Secretariat Office of the Arbitration Commission sent the (95) Maozhongzi __ Arbitration Court Session Notice to the [Seller] by registered mail and via fax and to the [Buyer] by registered mail.

On 19 March 1996, the court session was held in Beijing as planned. The [Seller] sent its agent to the court session. They made oral statements and answered the Arbitration Tribunal's questions. The [Buyer] did not send its agent to the court session.

After the court session, on 8 April 1996, the [Seller] submitted supplementary documents to the Arbitration Tribunal.

On 9 April 1996, the Secretariat of the Arbitration Commission informed the [Buyer] of the court session and forwarded the supplementary documents submitted by the [Seller] after the court session by mail. Meanwhile, it also asked the [Buyer] to submit a written application before 10 May 1996, if the [Buyer] had objections on the [Seller]'s arbitration application and the documents submitted afterwards, or if the [Buyer] wanted a second court session.

The aforesaid mail was sent to the [Buyer] by express mail, however, no written arbitration defense was received from the buyer within the time limit stipulated in the aforesaid letter, nor did the [Buyer] ask for a second court session.

On 20 May 1996, the [Seller] again submitted supplementary documents to the Arbitration Tribunal. The Secretariat Office of the Arbitration Commission sent the aforesaid documents to the [Buyer] by express mail, asking the [Buyer] to respond before 30 June 1996 if it had any objections to these documents, however, no response has been received.

This case has been concluded. The Arbitration Tribunal made this award after discussion. The following are the facts, the Tribunal's opinion and award.

I. FACTS

POSITION OF THE PARTIES

A. [Seller]'s position

The [Seller] alleges that:

In April 1993, the [Seller] created a business connection with the [Buyer] and started selling brake pads to the [Buyer]. By the end of December 1993, the [Seller] had sold US $1,460,000 worth of goods to the [Buyer]. The payment term for these goods was D/P forty-five days. [Buyer] paid on time.

At the end of 1993, the Vice-president of the [Buyer], Mr. Peter, came to Qingdao to negotiate the plan for purchasing brake pads for 1994, asking whether the [Seller] could change the payment term to D/A forty-five days. Considering the [Buyer]'s good record of payment, the [Seller] agreed to this request.

From January 1994 to May 1994, the [Seller] had delivered eighty-eight containers of goods, however, the [Buyer] has paid for only four of them, totaling US $69,027. The [Buyer] has not paid the price for the remaining eighty-four containers, totaling U S $1,479,155.73. The following are the eight contracts that have not been paid:

94BQDTUSD 005A-C signed on 14 January 1994;
94BQDTUSD 010 signed on 26 January 1994;
94BQDTUSD 0015A-B signed on 23 February 1994;
94BQDTUSD D0020A-B signed on 5 March 1994;
94BQDTUSD 0025A-B signed on 23 March 1994;
94BQDTUSD 0029A-B signed on 13 April 1994;
94BQDTUSD 032A-C signed on 3 May 1994;
94BQDTUSD D039A-C signed on 19 May 1994

Following the above contracts, the [Seller] shipped the goods from Qingdao port, and from 3 February 1994, the [Seller] has repeatedly urged the [Buyer] to make the payment, however, the [Buyer] has not raised any reasons for its non-payment, and admitted that it delayed the payments for the aforesaid contracts. Because of the [Buyer]'s delay in payment, on 9 May 1994, the [Seller] stopped delivery.

On 13 July 1994, Mr. Peter, the [Buyer]'s Vice President, sent a fax to the [Seller], asking [Seller] to continue the delivery, and change the payment term to D/A ten days. The [Buyer] promised that it would pay an extra 10% of the price for the amount in arrears until the entire balance was paid. [Seller] also promised that it would pay US $50,000 every week and it would compensate the loss resulting from the [Buyer]'s delay in payment. However, the [Buyer] never made the payment it promised.

The following are the loss to the [Seller] caused by the [Buyer]'s delay in payment.

  1. Because of the nonpayment, the [Seller]'s circulating fund has been quite tight, with the consequence that the [Seller] has missed several business chances because of lacking of money. In addition, the [Seller]'s loss of interest is US $138,476.04;

  2. The [Seller]'s suppliers have asked for compensation of renminbi [RMB] 474,400;

  3. Because the [Buyer] did not pay the price for the aforesaid eight contracts of US $1,479,155.73 and the price of Contract No. 94BQDTUSDD 072, which is not in this case, of US $85,693.69, with the result, the [Seller] could not receive the tax refund for exporting goods of RMB 1,592,910.30 from the government.

  4. The [Seller] has paid attorneys' fee of RMB 250,000 for resolving this dispute on payment.

Both the [Buyer]'s and the [Seller]'s places of business are in Contracting States of the United Nations Convention on Contracts for the International Sales of Goods (hereafter, the "CISG"), therefore, the CISG should be applied.

According to the CISG, the [Buyer] has received the goods and its conduct is inconsistent with the [Seller]'s title of the goods, which has constituted a fundamental breach of the contract, therefore, the [Seller] asks the Arbitration Tribunal to order that:

(1) [Buyer] shall immediately pay US $1,479,155.73 in arrear to the [Seller];
(2) [Buyer] shall pay the loss of interest to the [Seller] of US $138,476.04;
(3) [Buyer] shall pay the [Seller]'s other losses of RMB 2,067,310.30;
(4) [Buyer] shall pay the [Seller]'s attorneys' fee of RMB 250,000;
(5) [Buyer] shall pay the entire arbitration fee.

The [Seller] made additional statement in its supplementary documents submitted to the Arbitration Tribunal after the court session stating:

  1. The eight contracts in the case were concluded by the agreement of the two parties at their free will. They were signed by representatives acting for the parties, and the contract clauses followed the related international trade usages, the U.S. law, and the Chinese law. Therefore, the contracts are effective, and the [Seller]'s right under the contracts should be protected.

  2. [Seller] has performed its obligations under all eight contracts, and the [Buyer] has admitted that it has accepted the goods without raising any objections.

  3. The eighth delivery was made on 23 May 1994. According to the payment term, D/A forty-five days, as stipulated in the contract, the payment for the eighth delivery should have been made before 15 July 1994, however, no payments have been made for the eight deliveries, which constitutes a violation of the contracts.

  4. The [Buyer]'s delay in payment has caused losses to the [Seller], such as:

    (1) The price for eight deliveries, totaling US $1,479,155.73;

    (2) Bank interest on loan of RMB 3,101,531.09 (see the tables hereinafter), calculated at the exchange rate of 8.335 at the end of March 1996, totaling US $372,109.30;

    (3) Tax refund for exporting goods;

    (4) Arbitration fee and attorneys' fee.

  5. According to Article 62 of the CISG, the [Seller] has the right to ask the [Buyer] to pay the price under the eight contracts, and based on Article 74 and Article 78 of the CISG, the [Seller] asks the Arbitration Tribunal to rule that the [Buyer] shall pay the aforesaid price and the interest on it.

(1) Loss of interest (from date interest obligation incurred to the end of May 1995)

Contract No.             Contract Price Date of
Beginning of
Interest Obligations  
US dollar & RMB
Exchanging Rates
 Total 
of
Days
The RMB Interest
Rate
Total
Interest in
RMB___

(1) 94BQDTUSD 005A-C US $222,027.10   23 March 1994 8.6761 = 1,926,329.32  
434
10.98% 251,495. 21
(2) 94BQDTUSD 010 US $188,709.70 4 April 1994 8.6840 = 1,638,755.03
422
10.98% 208, 034.78
(3) 94BQDTUSD 0015 US $210,978.15 27 April 1994 8.6677 = 1,828,695.31
399
10.98% 219,492.48
(4) 94BQDTUSDD 0020 US $120,417.44 31 May 1994 8.6407 = 1,040,490.97
365
10.98% 114,245.89
(5) 94BQDTUSD 0025 US $155,981.72 31 May 1994 8.6390 = 1,347,526.07
365
10.98% 147,958.35
(6) 94BQDTUSD 0029 US $139,323.98 21 June 1994 8.6367 = 1,203,299.41
344
10.98% 124,520.71
(7) 94BQDTUSD 032A-C US $200,893.94 24 July 1994 8.6145 = 1,730,600.84
311
10.98% 160,907.42
(8) 94BQDTUSDD 039A-C US $240,823.70 2 August 1994 8.5788 = 2,065,978.35
302
10.98% 187,690.44
Total: RMB 1,415,345.28

Note: The date the interest obligation was incurred = 10 days after [Seller] provided the documents + 45 days.

(2) Loss of interest (from the end of May 1995 to the end of April 1996)

Contract No. Contract Price In RMB
Total
Days
RMB Int.
Rate
Daily
Interest
Rate
Total
Interest
(1) 94BQDTUSD 005A-C US $222,027.10 1,926,329.32
334
12.98% 0.03556%
(2) 94BQDTUSD 010 US $188,709.70 1,638,755.03
334
12.98% 0.03556%
(3) 94BQDTUSD 0015 US $210,978.15 1,828,695.31
334
12.98% 0.03556%
(4) 94BQDTUSDD 0020 US $120,417.44 1,040,490.97
334
12.98% 0.03556%
(5) 94BQDTUSD 0025 US $155,981.72 1,347,526.07
334
12.98% 0.03556%
(6) 94BQDTUSD 0029 US $139,323.98 1,203,299.41
334
12.98% 0.03556%
(7) 94BQDTUSD 032A-C US $200,893.94 1,730,600.84
334
12.98% 0.03556%
(8) 94BQDTUSDD 039A-C US $240,823.70 2,065,978.35
334
12.98% 0.03556%
(9) Interest on date obligation incurred to 31 May 1995: 1,415,345.28
334
12.98% 0.03556%
Total: 14,197,020.58
334
0.03556% 1,686,185.81

(3) Loss of interest (calculated from the date interest obligation was incurred in 1994 to the end of April 1996)

1.  From the day interest occurred in 1994 to the end of May 1995   RMB 1,415,345.28
2. From the end of May 1995 to the end of April 1996 RMB 1,686,185.81
3. Total: RMB 3,101,531.09

The [Seller] filed an additional statement in the second set of supplementary documents submitted after the court session, saying that the total contract price for the eight contracts is US $1,622,803.50, however, during the performance of the contract, the [Seller] has made changes to the quantity of the goods based on international trade usages in light of the volume of the containers. Therefore, the actual contract price for the eight contracts is US $1,479,155.73 with the same unit price.

After delivering the goods, the [Buyer] has received the entire quantity of goods without raising objections, therefore, the quantity of the goods should be the goods actually delivered.

Above all, the [Seller] changed its second arbitration claim in its "Modifying Arbitration Claim Application" by increasing the loss of interest from US $125,628.22 to RMB 3,101,531.09, which is US $372,109.30, and relinquishing the third claim in its arbitration application and the other loss of RMB 2,067,310.30.

II. OPINION OF THE ARBITRATION TRIBUNAL

(1) The applicable law

The [Buyer]'s and the [Seller]'s places of business are in Contracting States of the CISG, therefore, the CISG should be the applicable law for all eight contracts involved in this dispute.

(2) The [Buyer]'s violation of the contract

Pursuant to the eight contracts, the [Seller] has delivered eighty-eight containers of goods to the [Buyer], however, the [Buyer] has only paid the price for four containers of goods, totaling US $69,027. The remaining US $1,479,155.73 still has not been paid.

The [Buyer] has sent a fax to the [Seller] saying that the reason for the delay in payment was because the [Buyer] could not receive payment from its customers, with the result its available funds became tight.

The Arbitration Tribunal notes that the payment term in the contract is D/A forty-five days, therefore, the [Buyer] should have paid the price within forty-five days after receiving the goods. Receiving payments from its customers is not a condition for making payment in this case, and the lack of money or the difficulties in circulating money should not be the reason for delaying payment.

In addition, after [Seller] filed its arbitration application, the [Buyer] has not provided to the Arbitration Tribunal any reason for its non-payment. Therefore, according to the related articles in the CISG and the contract, the [Buyer] has no reason not to perform the obligation in the contract, and the [Buyer]'s delay in payment has constituted a contract violation, which indicates that the [Buyer] should pay not only the price, but also the entire loss to the [Seller].

(3) The [Seller]'s arbitration claim

1. Claim for the contract price of US $1,479,155.73

According to Article 62 of the CISG, "the seller may require the buyer to pay the price, take delivery or perform his other obligations, unless the seller has resorted to a remedy which is inconsistent with this requirement". In the instant case, the [Seller] has delivered the goods, and the [Buyer] has accepted the goods without paying the price, therefore, the [Seller]'s claim for the price of US $1,479,155.73 should be accepted.

2. Claim for the loss of interest of US $372,109.30

The Arbitration Tribunal finds that the [Buyer] should have paid the price within forty-five days after it received the goods, however, the [Buyer] delayed the payment, with the result, the [Seller] has suffered loss of interest; therefore, the [Buyer] shall pay the interest to the [Seller].

The [Buyer] did not raise any objections to the calculation of the interest, and the Arbitration Tribunal deems that the [Seller]'s interest calculation is reasonable and objective. Therefore, the [Seller]'s claim for loss of interest of US $372,109.30 should be accepted.

3. Because the [Buyer] has violated the contract, the [Seller]'s claim for its attorneys' fee and other costs of RMB 250,000 is acceptable

4. [Buyer] shall bear the entire arbitration fee.

III. THE AWARD

The Arbitration Tribunal rules that

(1) [Buyer] shall pay the price of US $1,479,155.73 to the [Seller];

(2) [Buyer] shall pay the [Seller]'s loss of interest, totaling US $372,109.30;

(3) [Buyer] shall pay the [Seller]'s attorneys' fee of RMB 250,000;

(4) [Buyer] shall pay the entire arbitration fee. The [Seller] has paid RMB __ in advance, therefore, the [Buyer] shall pay back RMB __ to the [Seller].

[Buyer] shall pay the aforesaid sum, totaling US $1,851,265.03 and RMB 577,437, within forty-five days after this award takes effect, otherwise, 8% annual interest shall be added.

This is the final award.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Claimant of the People's Republic of China is referred to as [Seller]; Respondents of the United States of America is referred to as [Buyer]. Amounts in the currency of the United States (dollars) are indicated as [US $]; amounts in the currency of the People's Republic of China (Renminbi) are indicated as [RMB].

** Meihua Xu, LL.M. University of Pittsburgh School of Law on an Alcoa Scholarship. She received her Bachelor of Law degree, with the receipt of Scholarship granted by the Ministry of Education, Japan, from Waseda University, Tokyo, Japan. Her focus is on International Business Law and International Business related case study.

*** John W. Zhu, LL.M. China University of Political Science and Law (National Graduate Scholarship); Bachelor of Law, Southwest University of Political Science and Law; Double Degree, English Literature, Sichuan International Studies University, Chongqing, China. Focus: International Economic Law.

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